SN Brussels Airlines and Virgin Express Holdings have signed an agreement to create a single airline based in Brussels, The Associated Press reported.

The deal marks another small step toward consolidating Europe’s fragmented airline industry, after Air France and Dutch KLM joined forces earlier this year.

Like the Franco-Dutch tie-up, SN and Virgin will form a joint holding company. SN will receive a majority 70.1 percent stake and Virgin the remaining 29.9 percent.

The airlines expect to complete the deal in the first quarter of 2005. During the first two years of the merger, the airlines can continue to operate as separate brands.

SN Air Holding Chairman Etienne Davignon told the AP that the deal will “limit the current excess capacity on certain routes, better respond to the requirements of our clients and also help the development of Brussels airport.”

The increasing purchasing power of a combined network and cost savings will make the new airline more competitive, Davignon added.

The airlines will set up an integration committee consisting of three executives from SN and one from Virgin. Their first priority will be to optimize the flight schedules of the two airlines.